Taxes in America: What Everyone Needs to Know

I. HOW ARE WE TAXED?; 1. THE VIEW FROM 35,000 FEET; A. WHY IS EVERYONE ALWAYS SO WORKED UP ABOUT TAXATION?; B. WHAT IS A TAX?; C. WHAT ARE THE MAJOR KINDS OF TAXES?; D. HOW ARE TAXES LIKE DUCKS?; E. ARE THERE "HIDDEN" TAXES?; F. ARE THERE WAYS TO RAISE REVENUE OTHER THAN TAXES?; G. HOW CAN REGULATIONS BE LIKE TAXES?; H. HOW HAVE TAXES CHANGED OVER TIME?; I. HOW DO THEY VARY ACROSS STATES?; J. HOW DO TAX BURDENS VARY AROUND THE WORLD?; K. HOW DOES THE COMPOSITION OF TAX CHANGE BETWEEN FED, STATE, AND LOCAL?; L. FEDERAL TAXES IN THE US HAVE BEEN AT ABOUT 18 PERCENT OF GDP FOR 50 YEARS. DOES THAT MEAN THAT THIS IS THE NATURAL RATE OF TAXATION?; M. WHY IS THE LONG-TERM FISCAL OUTLOOK SO DIRE?; 2. PERSONAL INCOME TAXES; A. WHAT'S THE DIFFERENCE BETWEEN A PERSONAL TAX AND A BUSINESS TAX?; I. WHY DO ECONOMISTS SAY THAT IT DOESN'T MATTER WHO ACTUALLY PAYS A TAX?; II. AREN'T THERE CASES IN PRACTICE WHERE IT DOES MATTER WHO WRITES THE CHECK?; B. WHAT IS THE PERSONAL INCOME TAX?; I. WHAT'S THE DIFFERENCE BETWEEN A CREDIT, DEDUCTION, AND EXEMPTION?; II. WHAT'S A REFUNDABLE TAX CREDIT?; 1. WHAT ARE THE BIGGEST REFUNDABLE CREDITS?; III. IS IT TRUE THAT MOST PEOPLE DON'T PAY INCOME TAXES?; 1. WHO ARE THEY? WHY DOES IT HAPPEN?; 2. IS THAT BAD FOR DEMOCRACY?; C. DO WE TAX CAPITAL INCOME AS MUCH AS LABOR INCOME?; I. WHAT'S THE EFFECT OF TAX BREAKS FOR PENSIONS AND RETIREMENT ACCOUNTS?; II. HOW DO WE TAX CAPITAL GAINS AND DIVIDENDS? WHY DO WE DO IT THAT WAY?; III. WOULD A SCANDINAVIAN STYLE DUAL INCOME TAX MAKE MORE SENSE?; IV. ARE THERE OTHER BETTER OPTIONS TO LESSEN THE TAX BURDEN ON CAPITAL?; D. WHAT IS "ECONOMIC INCOME" WHY DON'T WE TAX THAT?; I. YOU WANT TO TAX MY IMPUTED RENT?????; E. WHAT IS THE AMT?; I. WHERE THE HECK DID IT COME FROM AND WHY IS IT SO HARD TO GET RID OF?; F. DOES UNCLE SAM REALLY WANT YOU TO LIVE IN SIN?; G. HOW DOES INFLATION AFFECT THE INCOME TAX?; H. WHAT ARE PAYROLL TAXES, AND HOW ARE THEY DIFFERENT FROM INCOME TAXES?; 3. BUSINESS INCOME TAXES; A. HOW DO WE TAX CORPORATIONS' INCOME?; B. WHY TAX CORPORATIONS?; C. CORPORATIONS EARN TRILLIONS OF DOLLARS EVERY YEAR. WHY DO THEY PAY SO LITTLE TAX?; I. WHO PAYS THE CORPORATE INCOME TAX?; II. WHY IS IT HARD TO TELL WHO ULTIMATELY BEARS THE BURDEN OF THE CORPORATE INCOME TAX?; D. WHY DO ECONOMIST SAY THAT WE "DOUBLE TAX" CORPORATION INCOME?; I. WHAT ARE THE IMPACTS OF DOUBLE-TAXING CORPORATE INCOME?; II. WHAT WOULD HAPPEN IF WE JUST ELIMINATED THE CORPORATE INCOME TAX?; E. HOW CAN SOME COMPANIES GET AWAY WITH PAYING NO INCOME TAX DESPITE BILLIONS IN PROFITS?; I. WHY IS IT TROUBLESOME THAT SOME COMPANIES VIEW THEIR TAX DEPARTMENTS AS PROFIT CENTERS?; F. WHAT IS DEPRECIATION?; I. WHY NOT LET BUSINESSES WRITE OFF THEIR INVESTMENTS RIGHT AWAY?; II. WHAT IS "BONUS DEPRECIATION?"; III. WHAT ARE INVESTMENT TAX CREDITS?; G. ARE THERE IMPLICIT SPENDING PROGRAMS RUN THROUGH THE CORPORATE INCOME TAX TOO?; I. WHY DO WE HAVE ETHANOL TAX SUBSIDIES, OIL AND GAS SPECIAL TAX BREAKS, ETC.?; H. WHAT ARE TAX HAVENS?; I. WHAT IS A FOREIGN TAX CREDIT? WHY ARE THEY ALLOWED?; I. WHY DO WE TRY TO TAX CORPORATIONS ON THEIR WORLDWIDE INCOME? WHY NOT FOLLOW THE PRACTICE IN MOST OF EUROPE AND SIMPLY EXEMPT FOREIGN INCOME FROM TAX?; II. WHAT IS TRANSFER PRICING? WHY IS IT IMPORTANT TO MULTINATIONALS (AND TAXPAYERS)?; III. WHAT IS FORMULARY APPORTIONMENT? WOULD THAT BE A BETTER OPTION?; J. WHAT ARE THE OTHERS WAYS BUSINESS INCOME IS TAXED?; I. WHAT IS AN S-CORPORATION, LLC, ETC?; II. HOW ARE PARTNERSHIPS AND SOLE PROPRIETORSHIPS TAXED?; 4. TAXING SPENDING; A. WHAT IS A CONSUMPTION TAX?; B. WHAT IS A RETAIL SALES TAX?; C. WHAT IS A LUXURY TAX?; D. WHAT IS AN EXCISE TAX?; I. WHAT IS A SIN TAX?; E. WHAT IS A VAT?; I. WHY DOESN'T THE US HAVE ONE?; II. WOULD IT BE MORE COMPLEX IN THE US BECAUSE OF STATE SALES TAXES?; III. DOES A VAT PROMOTE EXPORTS?; IV. IS IT SELF-ENFORCING?; F. WHAT IS THE FLAT TAX?; I. WOULDN'T A FLAT TAX BE SUPER SIMPLE AND FAIR?; II. IS THE FLAT TAX ADVOCATES CALL FOR IN THE US THE SAME AS HAS BEEN INTRODUCED AROUND THE WORLD?; G. WHAT IS THE X-TAX?; H. DO CONSUMPTION TAXES DISPROPORTIONATELY BURDEN THE ELDERLY, OR THE POOR?; I. WHAT CAN BE DONE ABOUT THAT?; 5. OTHER KINDS OF TAXES; A. WHAT IS THE DIFFERENCE BETWEEN AN ESTATE AND AN INHERITANCE TAX?; B. WHAT ARE WEALTH TAXES?; C. WHAT IS THE PROPERTY TAX?; D. WHAT IS A GROSS RECEIPTS TAX?; E. WHAT IS A LUMP-SUM TAX?; F. WHY DO ECONOMISTS LIKE THE IDEA OF A POLL TAX OR A TAX ON ABILITY?; I. DOES THIS EXPLAIN WHY PEOPLE DON'T LIKE ECONOMISTS?; II. THE COSTS AND BENEFITS OF TAXATION; 6. TAXES AND THE ECONOMY; A. HOW DO TAXES AFFECT THE ECONOMY?; B. WHY DO ECONOMISTS THINK THAT MOST TAXES COST MUCH MORE THAN THEIR STICKER PRICE?; C. DO SOME TAXES HELP THE ECONOMY?; I. SOME DISCUSSION OF CARBON TAXES, CAP AND TRADE, AND THE RELATIVE ADVANTAGES OF EACH; D. IS IT EVER A GOOD IDEA TO RUN DEFICITS?; E. WHAT ARE BUILT-IN STABILIZERS?; F. WHICH IS A BETTER ECONOMIC STIMULUS DURING AN ECONOMIC DOWNTURN, TAX CUTS OR SPENDING?; G. WHAT KIND OF TAX CUTS ARE THE BEST STIMULUS?; H. WHEN INTEREST RATES ARE LOW, WHY NOT RUN GIANT DEFICITS?; I. IF PEOPLE CARE ABOUT THEIR CHILDREN, WON'T THEY JUST SAVE MORE TO MAKE UP FOR ANY DEFICITS? I.E., DO DEFICITS MATTER AT ALL?; J. WHAT KIND OF TAX SYSTEM IS MOST CONDUCIVE TO ECONOMIC GROWTH?; K. IS THERE A TRADE-OFF BETWEEN ECONOMIC GROWTH AND OTHER OBJECTIVES, LIKE FAIRNESS?; L. WHY DO SMART, SERIOUS PEOPLE DISAGREE ABOUT OPTIMAL TAX POLICY?; M. HOW DO TAXES AFFECT INTERNATIONAL COMPETITIVENESS (AND WHAT DOES THAT MEAN)?; I. ARE SOME TAXES "JOB KILLERS," AND OTHERS "JOB CREATORS"?; II. DO TAXES AFFECT WHERE COMPANIES LOCATE THEIR HEADQUARTERS?; III. DO THEY AFFECT THE BALANCE OF TRADE?; N. WHAT IS "TRICKLE-DOWN" ECONOMICS?; O. WHAT IS THE LAFFER CURVE? CAN TAX CUTS PAY FOR THEMSELVES?; P. HOW DO TAXES AFFECT WORKING AND SAVING?; Q. HOW DO THEY AFFECT ENTREPRENEURSHIP?; R. HOW DO THEY AFFECT RESEARCH AND INNOVATION?; S. DOES IT MATTER IF OUR TAX RATES ARE HIGHER THAN OTHER COUNTRIES'?; 7. THE HIDDEN WELFARE STATE; A. ARE A TRILLION DOLLARS IN MIDDLE CLASS ENTITLEMENT PROGRAMS REALLY HIDDEN IN THE TAX CODE?; B. HOW SHOULD WE DECIDE WHETHER TO RUN A SUBSIDY THROUGH THE TAX SYSTEM? HOW DO WE DO IT IN PRACTICE?; C. IS THE BUDGET PROCESS BIASED IN FAVOR OF TAX EXPENDITURES COMPARED WITH DIRECT SPENDING?; D. DOES THE INCOME TAX SUBSIDIZE HOUSING?; E. DOES THE INCOME TAX SUBSIDIZE HEALTH SPENDING?; F. WHY NOT SUBSIDIZE EVERYTHING?; G. ISN'T IT A GOOD IDEA TO REWARD PEOPLE (AND BUSINESSES) FOR GOOD BEHAVIOR?; H. ARE THERE TOO MANY TAX EXPENDITURES?; 8. THE BURDEN OF TAXATION; A. WHAT MAKES A TAX SYSTEM FAIR?; B. WHY IS THE THERE OFTEN A TRADE-OFF BETWEEN FAIRNESS AND EFFICIENCY?; C. WHAT IS THE BURDEN OF TAXATION? WHY IS IT HARD TO MEASURE?; D. WHAT IS THE BURDEN OF DEFICITS?; E. HOW IS THE TAX BURDEN DISTRIBUTED?; F. IS A PROGRESSIVE TAX SYSTEM CLASS WARFARE?; 9. TAX ADMINSTRATION AND ENFORCEMENT; A. HOW DOES TAX REMITTANCE AND COLLECTION WORK?; B. HOW MUCH DOES IT COST THE IRS TO RUN THE US TAX SYSTEM?; C. WHY DOES THE IRS LIKE E-FILING?; D. WHAT IS TAX WITHHOLDING? CAN IT BE EXTENDED TO OTHER FORMS OF INCOME?; E. WHAT IS INFORMATION REPORTING?; F. WHY DO PEOPLE CHEAT ON THEIR TAXES? WHY DO THEY COMPLY?; G. HOW MUCH CHEATING IS THERE?; H. WHY ARE SOME TAXES EASIER TO EVADE THAN OTHERS?; I. IS THE INCOME TAX CONSTITUTIONAL?; J. WHAT'S THE DIF? (WHO GETS AUDITED?); K. HOW MUCH MORE TAX COULD THE IRS COLLECT WITH BETTER ENFORCEMENT?; L. WHY NOT AUDIT EVERYONE?; M. WOULD A VAT BE SELF-ENFORCING?; N. ARE REFUNDABLE TAX CREDITS ESPECIALLY PRONE TO TAX EVASION?; M. WHAT ARE TAX SHELTERS?; N. SHOULD I GET A TAX REFUND?; O. DO MOST PEOPLE GET TAX REFUNDS?; P. HOW MANY PEOPLE USE TAX PREPARERS?; Q. WHY IS THE TAX SYSTEM SO COMPLEX?; I. HOW SHOULD TAX COMPLEXITY BE MEASURED?; II. HOW HIGH ARE THE COSTS OF COMPLIANCE?; III. WHO BENEFITS FROM TAX COMPLEXITY?; IV. DO FEWER TAX BRACKETS PROMOTE SIMPLICITY?; V. WHAT ARE PHASE-OUTS AND PHASE-INS?; VI. WHY IS THERE A TRADE-OFF BETWEEN SIMPLICITY AND OTHER GOALS?; R. WHAT ARE THE CONSEQUENCES OF THE INTERNET FOR THE TAX SYSTEM?; A. SHOULD STATES BE ABLE TO TAX INTERNET AND MAIL-ORDER SALES FROM OTHER STATES?; S. IF ALMOST EVERYONE USES TAX SOFTWARE OR PAID PREPARERS, WHY SHOULD WE CARE ABOUT COMPLEXITY?; III. A TOUR OF THE SAUSAGE FACTORY; 10. TAX POLITICS; A. WHAT DOES THE PUBLIC KNOW ABOUT TAXES?; B. WHAT DOES THE PUBLIC THINK ABOUT TAXES?; C. HOW DOES DO NEW TAXES GET ENACTED?; D. HOW DOES THE TAX SAUSAGE GET MADE? (HOUSE AND SENATE RULES); E. WHAT IS THE "TWO SANTA CLAUS" THEORY?; F. WHAT IS THE "STARVE THE BEAST" STRATEGY?; I. IS THERE EVIDENCE THAT IT HAS WORKED?; G. IS THE SYSTEM BIASED IN FAVOR OF TAX EXPENDITURES?; H. WHAT IS DYNAMIC SCORING?; I. RAISE TAXES, OR CUT SPENDING?; 11. TAX RHETORIC; A. HOW TO RECOGNIZE FOOL'S GOLD TAX REFORM PLANS?; I. FAIRTAX; II. FLAT TAX; III. RYAN'S OPTIONAL ALTERNATIVE TAX; IV. FINANCIAL TRANSACTION TAX (SECURITIES TRANSFER TAX); B. WHAT ARE WOULD-BE TAX REFORMERS FAVORITE CLICHES (AND DO THEY HELP ADVANCE THE GOAL)?; I. "LEVEL PLAYING FIELD"; II. "NEUTRAL"; III. "BROAD-BASED, LOW-RATE"; IV. "COMPETITIVE"; V. "JOB CREATOR"; VI. "PRO-GROWTH"; VII. "SIMPLER"; 12. TAX REFORM; A. IS THE BROADEST BASE ALWAYS THE BEST BASE?; B. WHICH LEVEL OF GOVERNMENT SHOULD LEVY, AND COLLECT, TAXES?; C. HOW SHOULD FEDERAL AND STATE TAXES BE COORDINATED?; D. DOES THE FRAMING OF TAXES AFFECT BEHAVIOR?; E. WHAT IS A REVENUE-NEUTRAL TAX CHANGE?; F. SHOULD TAX REFORM AND DEFICIT REDUCTION BE SEPARATED?; G. COULD MOST TAXPAYERS BE SPARED ANY FILING REQUIREMENT (AS IN THE UK)?; H. COULD THE IRS FILL OUT OUR TAX RETURNS FOR US?; I. WOULD SIMPLIFYING TAX COMPLIANCE BE UNFAIR TO H&R BLOCK AND INTUIT?; I. THE BIZARRE STORY OF CALIFORNIA'S EXPERIMENT WITH PRE-FILLED RETURNS; J. ARE THERE SOME SENSIBLE TAX REFORM IDEAS?